Nebraska Legislature

Nearly 100 tax-related bills have been introduced this legislative session, with topics ranging from selling alcohol at farmer’s markets to excluding retired military from state income tax.

Chair of the Revenue Committee Sen. Lou Ann Linehan, said the committee has a package of sales tax bills and a package of income tax bills it is working to pass this session. The committee’s two priority bills, LB432 and LB595, will each have several other tax bills amended into them after hearings have concluded.

“When we start the session, we don’t know what our priority is going to be because all the members on the committee have different ideas,” Linehan said. “We file what we call shell bills, meaning they’re an empty shell, and when we get to the end of all our hearings, we’ll replace it with legislation we think should go forward.”

LB432, the income tax package, would do the following:

  • Lower the tax rate for income paid by foreign corporations
  • Allow money from the Nebraska college savings plan to be used for apprenticeships
  • Decrease the corporate tax rate to match the individual tax rate
  • Provide a tax credit of $2,000 to families of a stillborn child
  • Exempt from income tax funds a firefighter receives as insurance payments for cancer benefits

LB595, the sales tax package, would do the following:

  • Repeal sales tax on inputs for ethanol production
  • Repeal sales tax on inputs for agricultural business
  • Exempt Nebraska Advantage participants from sales tax
  • Extend the law that distributes sales and use tax of motor boats, personal watercraft, all-terrain vehicles and utility-type vehicles to the Game and Parks Commission

Two tax bills not included in the packages that have made advancements this session are LB274 and LB387.

Under the Nebraska Liquor Control Act, LB274 would create a special designated license for promotional farmer’s markets. The license — $15 annually — would allow farm wineries, craft breweries and micro-distilleries to sell their products at farmer’s markets.

The bill has had several amendments since it was introduced on Jan. 12, the latest amendment having been filed on March 15. Another provision of the bill would create a new category of ready-to-drink cocktails, taxing them at 31 cents per gallon.

LB274 is currently in the second stage at which the bill is considered by the full Legislature.

LB387, if passed, would exempt pay for retired military veterans from state income tax. Introduced by Sen. Tom Brewer of Gordon at the request of Gov. Pete Ricketts, the bill’s supporters hope to motivate more retired veterans to settle in Nebraska after they are discharged.

Under current law, beginning in 2022, veterans could exclude 50% of their military retirement income from state income tax; LB387 would change that to 100%.

“We tried to do it last session, last legislature, but because of the pandemic, people were worried about money, so we only did half of it,” Linehan said.

According to Unicameral Update, the Nebraska Department of Revenue estimates LB387 would reduce the state’s income tax revenue by about $13 million in fiscal year 2022, $13.7 million in fiscal year 2023 and $14.4 million in fiscal year 2024.

The bill is awaiting final approval.

Linehan counted another 17 bills that are priority for individual senators, meaning tax bills make up a third of all priority bills in the Legislature this session. In past years, Linehan said there might not have been quite as many tax-related bills, but the bills were more costly, like last session’s tax incentive package LB1107.

Linehan said she believes current spending proposals will leave enough money leftover to cut taxes and move some of her committee’s bills forward.

“I believe what we should do with that money is cut taxes,” Linehan said. “So, now, it will be up to the Legislature to say which one of these taxes is most important.”